The Obama administration on Friday came out strongly in support of extending long-term unemployment insurance past its current expiration date. …”We have always done so when unemployment is this high and would make little sense to fail to do so now when we are still facing the burdens of the worst downturn since the Great Recession,” [Obama economic adviser Gene] Sperling said. “It is high bang for the buck for the economy, reduces poverty and helps workers who lost jobs due to no fault of their own get back on their feet.”

And now we have even more evidence showing that it doesn’t make sense to make leisure more attractive than employment. Four economists conducted some new empirical research to look at how unemployment benefits impact economic performance in the labor market. First they explain the theoretical concerns.

Unemployment in the U.S. rose dramatically during the Great Recession… The policy response involved an unprecedented extension of unemployment benefits with benefit duration rising from the usual 26 weeks to as long as 99 weeks. …The effectiveness of this policy response was questioned by Barro (2010) and Mulligan (2012), among others. Because unemployment benefit extensions represent an implicit tax on market work, they subsidize unemployment and discourage labor supply. …Everything else equal, extending unemployment benefits exerts an upward pressure on the equilibrium wage. This lowers the profits employers receive from filled jobs, leading to a decline in vacancy creation. Lower vacancies imply a lower job finding rate for workers, which leads to an increase in unemployment.

Then they report their findings, including the remarkable result that the bulk of poor employment numbers in recent years are the result of extended unemployment benefits.

Our empirical strategy exploits a policy discontinuity at state borders to identify the effects of unemployment insurance policies on unemployment. …We explicitly control for the effects of other policy changes at the state level (that could be correlated with the expansion of unemployment benefit durations) to ensure that our estimates isolate the effects of unemployment benefit extensions. …We find that unemployment rises dramatically in the border counties belonging to the states that expanded unemployment benefit duration as compared to the counties just across the state border. The quantitative magnitude of this effect is so large that our estimates imply that benefit extensions can quantitatively account for much of the unemployment dynamics following the Great Recession.

Some Keynesians argue that unemployment benefits are nonetheless good for the economy because of the impact on aggregate demand. But even if you believe Keynesian theory, the authors find that unemployment benefits don’t help because of the offsetting foregone income resulting from fewer jobs.

…an increase in unemployment due to benefit extensions is similar in magnitude to the decline of employment. Thus, the total effect on spending is ambiguous as extending benefits increase spending by the unemployed but at the same time decrease spending as fewer people are employed.

So what’s the bottom line? Simply stated, we need some tough love. There needs to be a limit on unemployment benefits so that companies will have more incentive to create jobs and so that unemployed people will have more incentive to get off the couch and find a job.

I don’t disagree with your basic premise, that making it even somewhat more attractive financially to collect unemployment benefits than to get a job encourages people to collect benefits until they expire. However, you generalize very widely by assuming or proclaiming that most people do this.

Please do not generalize in this way. There are many factors that prevent someone from finding a living-wage job. In my case, I have had many interviews and always was one of the two final candidates. In every situation the job was given to a person in their 40s; I at the time I was near 60. My work experience is substantial and I have a graduate degree in health services administration as well as a license as a registered nurse, with a history of positions of increasing responsibility. I am highly capable but employers see me as too old.

Beware of overgeneralizing; you misrepresent my, and others’, situations, as well as our desire to work. I appreciate your good work and read your commentary regularly.

Folks, wake up. The economic trajectory for the US, and the rest of the western world, is clear.

Supply incentives are not enough.

This is the twenty first century.
If you want to maintain your top prosperity in the world, you need enough supply incentives to outcompete four billion emerging world souls.

Do you understand what the chances of success are when virtually every majoritarian American electoral choice has the net effect of further flattening the effort-reward curve? I mean, what are the chances?

the numbers are against us… and ethnocentric fantasy has us blinded to the new realities of the world… we are at a pivotal time in our history… we need leaders capable substantive thought… and unrestrained vision… we will get fops and dandies… selling economic snake oil… pretty little twits with style… but no substance…

Since almost all unemployment programs REQUIRE you to report an active job search I find this quite untrue. What IS true however, is their are simply NOT ENOUGH JOBS!

I know a good number of people whose unemployment benefits have long expired. They still have no jobs (and do not receive welfare either). They are this century’s “forgotten man” and they still search for jobs in vain wile living with friends, family or in their cars.

When I used to get unemployed, I used to fall back to doing menial jobs – and lots of them- to get by. I would do anything- paint, car repair, plumbing, yard work, haul trash, etc. Today those jobs are all filled by people doing “jobs that Americans just won’t do”. Furthermore, most of our youth are so overly educated by college crap that they don’t have the basic technical skills to perform some of these tasks- so they don’t have a fall-back position.

However, my point is that if you unload the lower end of the system by reducing the illegal intrusion of undocumented workers, you might have some answers. After all, unemployment benefits are right at about minimum wage. And it would probably do folks some good to work a good hard-labor job once so they appreciate the higher paying jobs when they have them. It does the soul good to go to bed tired in the evening.